5th Circuit agrees that joint TM owners can't sue each other under any Lanham Act theory

Reed v. Marshall, --- F.4th ----, 2025 WL 1822673, No. 24-20198 (5^th Cir. Jul. 2, 2025)

Jade, an R&B, hip hop, and soul vocal group, rose to prominence in the 1990s. Jade disbanded in 1995, when the members began pursuing their respective individual careers. “Appellant Di Reed contends that her fellow Jade members, Joi Marshall and Tonya Harris, violated the Lanham Act by performing under their co-owned JADE mark with another singer, Myracle Holloway.” She lost because “the Lanham Act does not authorize claims between co-owners of a trademark.”

In 2018, the three original members agreed to a reunion tour, and collectively applied for joint ownership of the “JADE” service mark; it was registered in 2019 for “[e]ntertainment services in the nature of live musical performances.” The registrants were listed as Reed, Marshall, and Harris, all in their individual capacities. But the reunion fell through, and in June 2021, Marshall and Harris entered into a six-month work-for-hire contract with a different singer, Myracle Holloway. That trio performed as Jade at multiple “90’s Kickback Concert[s].” Promoters created social media ads that, Reed claims, inappropriately used her name, image, and likeness, along with the JADE mark.

Reed sued the other individuals, along with two other defendants (now settled out), alleging infringement, dilution, and unfair competition through false designation of origin and false advertising; as well as violations of Texas statutory and common law. After disposing of the federal claims because co-owners and licensees thereof can’t be sued, the district court found that it lacked supplemental jurisdiction over the state claims. This appeal followed.

The court of appeals framed the issue as one of statutory standing. (Scalia was never going to win this terminological issue.)

Reed, Marshall, and Harris “entered into joint ownership of the JADE mark—that is, each individual owns a complete interest in the mark.” This is disfavored—“a mark is fundamentally intended to ‘identify and distinguish a single commercial source,’ not three distinct owners,” but it is allowed (why, though, since it can’t actually perform that core function if the owners part ways and more than one keeps using the mark? This is an example of the US TM system not fully committing to the principles it says it uses; you could probably get a highly similar result by saying that the mark stops signifying the joint owners when they fragment and can be reappropriated by the first successful user thereof). Because “[a]ny discord between co-owners could result in ‘multiple, fragmented use’ that may result in ‘consumer confusion and deception,’” parties should contract to clarify “outcomes should owner interests become unaligned.” But they didn’t.

Too bad! The Lanham Act, “which is aimed at protecting consumers and mark owners from fraud and deceptive acts,” does not provide a cause of action “to remedy disputes between the co-owners of a trademark.” An owner definitionally can’t be an infringer. “Co-owners of a mark, who generally have the right to use their marks as they please,” are owners, not infringers. “[T]he question is not whether joint ownership of a trademark could cause confusion if co-owners went their separate ways, but whether the Lanham Act affords a statutory right for those co-owners to sue each other.” And Holloway was not an appropriate target either, because “Marshall and Harris, as persons with complete ownership interests in the mark, have an unencumbered right to use the mark as they please,” including by licensing. [Note that this is not correct—there are uses of the mark that will lead to loss of rights, not to mention potential conflicts with, say, JADE for other things if they try to expand.]

Dilution: Same result. Of note: “The plain text of 15 U.S.C. § 1125(c)(1) signals that at least two distinct marks need to be in play for dilution to occur: ‘the famous mark’ possessed by an owner, and an imposter ‘mark or trade name’ that causes dilution of the original mark.” Here, that mattered because an owner can’t be an imposter, but it has broader implications (if use as a mark is still a thing).

False advertising: Reed alleged that the “[d]efendants’ unauthorized use of [her] JADE Mark ... in conjunction with the promotion and provision of live entertainment services constitutes unfair competition and false advertising.” More specifically, defendants allegedly falsely advertised that “Holloway is a member of the group Jade” and “that the performances promoted and provided by Defendants are those of the group Jade.” But this hinged on the mistaken premise that defendants were using the JADE mark in an unauthorized manner. Also, there was no evidence that defendants’ use of the JADE “mark in commerce proximately caused Plaintiff to suffer injuries to commercial interests in business reputation or sales.”

Reed’s best allegation is that in marketing materials for the 2024 “R&B Block Party” concert, the event’s promoters created social media posts that included a Jade song that featured Reed’s voice. But with respect to the Lanham Act, Reed concedes that “[a] person’s name, image, or likeness cannot function as a trademark such that it affords a plaintiff a cause of action for trademark infringement,” and in any event, the promoters who made the advertisements in question are not parties to this suit.

Reed argued that she suffered “lost opportunities such as the creation of new compositions under JADE name and subsequent profits from new compositions”; “business reputation in the form of deliberate exclusion from promotional appearances under JADE name”; and lost “performances under the JADE name.” But, even had there been evidence in the record, “the defendants’ co-ownership of the JADE mark does not exclude Reed from using the mark as she pleases. In other words, the defendants’ use of the JADE mark has not caused Reed to ‘los[e] opportunities’ associated with the mark; she, as a co-owner, has the right to pursue those opportunities consistent with the (lack of) conditions linked to her ownership interests.” [Among the implications: she benefits from defendants’ use to preserve her own rights, since their use in commerce redounds to her benefit. Could a state law proceeding force partition by sale? What about partition in kind?]

False designation of origin: Here it seems like Belmora would at least allow for some sort of labeling remedy under appropriate circumstances, but Reed’s theory was not conducive to that. She argued that the defendants’ “unauthorized use” of the JADE “mark” and her “voice and likeness in commerce” was “likely to deceive consumers as to the origin, source, sponsorship, or affiliation of Defendants’ services.” Specifically, she argued that consumers would think that the Holloway-Marshall-Harris performances were “affiliated with or sponsored by” her. [My theory: people who knew the group but didn’t know the performers’ names would think that she was performing—this seems much more plausible. But the remedy might be much more limited.]

The court of appeals found that, even if she did fall within the statute’s zone of interests, her injuries were not proximately caused by a violation of the Lanham Act. [I don’t think this is a conflict with Belmora, but rejecting my theory might be—she doesn’t need to own a TM to bring a Belmora claim.] Her allegations were all premised on unauthorized use of the JADE mark. But that use wasn’t unlawful, and Lexmark bars “suits for alleged harm that is ‘too remote’ from the defendant’s unlawful conduct.”

 

Dastar bars claim against allegedly false copyright/licensing claims used to extract money from public domain works

McKenzie v. Artists Rights Soc., Inc., 2024 WL 4803870, --- F.Supp.3d ----, 2024 WL 4803870, 22 Civ. 1619 (JHR) (S.D.N.Y. Nov. 15, 2024)

McKenzie is an art publisher that worked with the late artist Robert Indiana to create and produce two images: one called “LOVE” and the other, “HOPE.” In the 1960s, the LOVE image “gained global popularity through display on commercial products, paintings, and outdoor sculptures,” all published without notice and thus in the public domain. 

LOVE sculpture, Wikimedia

HOPE sculpture, Wikimedia

In 2007, Plaintiff and Indiana created the HOPE image, “similar to the LOVE image,” which began competing with the LOVE image. Indiana didn’t claim copyright in the HOPE image either.

Nonetheless, Indiana entered into two contracts with a defendant-linked entity, Morgan, in the 1990s, pursuant to which Indiana purported to convey to Morgan all “copyright, trademark, and other rights” in LOVE—in addition to “the exclusive right to reproduce, promote, and sell” the LOVE image, “produce and fabricate,” own, and sell sculptures of LOVE, and the purported right to sue for copyright infringement of the LOVE image.

McKenzie alleged that “Defendants well knew” and “certainly know now” that LOVE was not, in fact, protected by copyright. Nevertheless, “Defendants ... combined together for at least two decades to fraudulently represent that they had and still have a copyright on the LOVE image” and engaged in false licensing to the tune of millions of dollars, harming plaintiff, which is authorized to “produce and market the HOPE [i]mage” and “is in direct competition with the LOVE image.”

The RICO claims failed because they were RICO claims (and untimely).

Lanham Act: McKenzie alleged that Defendants made false representations (1) in violation of § 1125(a)(1)(A), by claiming that “Morgan and ARS ow[n]ed the copyright to the LOVE image,” and (2) in violation of § 1125(a)(1)(B), by claiming “that ARS was authorized to license said copyright.” Neither survived Dastar. Cognizable misrepresentations regarding the “origin of goods” under § 1125(a)(1)(A) “refer[ ] to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.”

Although Dastar is about authorship, it also applies to claims “for false representation of ‘affiliation’ between the author and a distributor of communicative products,” even if through “a false assertion of license.” That was the essence of McKenzie’s complaint: Defendants “deceive[ ] the general public and the relevant market” that they have a copyright to LOVE—i.e., that Indiana (or his estate) provided them with the right to license products bearing the LOVE image.

What about false advertising? “Statements about whether a defendant has the right to use or distribute a work are not considered material ....” Thus, there was no actionable misrepresentation.

Even without that, Lexmark barred the claim. To allege causation, McKenzie pled that “HOPE and LOVE, as images, have no other competition than each other.” In addition, McKenzie alleged that defendants’ use of “the false copyright assertion in relation to its many licenses of the LOVE image has greatly enhanced the revenues derived from the LOVE image, and made it appear more valuable than the HOPE image given its supposedly copyright-protected status and the extensive public visibility it has acquired.” But McKenzie failed to allege that “consumers [e.g., potential licensees] were deceived by the fraudulent [copyright]” and “also that that deception” is what “led consumers to ‘withhold trade’ ” from McKenzie.

Plus, laches barred the claim.  Although “[i]n general, the defense of laches is not raised in a motion to dismiss[,] .... in certain circumstances, when the defense of laches is clear on the face of the complaint, and where it is clear that the plaintiff can prove no set of facts to avoid the insuperable bar, a court may consider the defense on a motion to dismiss.”

Although McKenzie averred that he “was unaware of the fraudulently concocted use of a false assertion of a ‘copyrighted’ LOVE image until ... February 25, 2020,” when one defendant was deposed in connection with a separate lawsuit, other allegations—including that, since 1999, defendants made “repeated” and “continuous” false assertions of copyright—undermined this position. He admitted that, “[b]efore the Hicks deposition [in 2020], [he] had seen the public advertising, observed that the large auction house and others all referred to the LOVE image as being copyrighted to Morgan and thus he believed ... that LOVE was copyrighted to Morgan.” At some point prior to Indiana’s death, he “notice[d] that virtually the entire artworld was marketing the LOVE image with the assertion that it was subject to a Morgan ‘copyright.’ ” He also alleged that, in 2007, thirteen years before the 2020 deposition, “Indiana would not authorize” him to produce a LOVE portfolio because Indiana “believed that Morgan had a copyright on the LOVE image based upon Morgan’s fraudulent representations to him that they had acquired one through his agreements with them.” Thus, he “knew” “or should have known” of any Lanham Act claim by no later than 2007. “The copyright registration status of the LOVE image was publicly available information that Plaintiff could, and ultimately did, uncover on his own.”

Thus, the delay in filing suit was inexcusable, and McKenzie didn’t rebut the defendants’ claims of prejudice based on their having continuously licensed LOVE since 1999 and the loss of evidence due to Indiana’s death.

using results from one product to tout another isn't passing off, but could be false advertising

Ortho-Tain, Inc. v. Colorado Vivos Therapeutics, Inc., 2024 WL 3925408, No. 20 C 4301 (N.D. Ill. Aug. 23, 2024)

Ortho-Tain sued defendants (including a bunch of former employees); I’ll focus only on the Lanham Act claims alleging that they falsely took credit for favorable results achieved by Ortho-Tain’s orthodontic appliance products used to treat various conditions such as sleep disordered breathing. Basically, dentists working as paid presenters showcased case studies of several pediatric patients who had achieved favorable results using Ortho-Tain’s orthodontic appliances. Defendant Vivos sponsored similar presentations, as well as a “parent webinar,” using the same exact case studies. The slides displayed the name “Vivos” and the presenters attributed the favorable results to Vivos’ products, not Ortho-Tain.

This could not be brought as a §43(a)(1)(A) claim because of Dastar. There was neither forward nor reverse passing off of the devices themselves, only of the results: “the connection between the favorable results and appliances is an intangible idea or concept.” It wasn’t about the source of the tangible good sold in the marketplace.

But (a)(1)(B) also exists! The presentations were plausibly “commercial advertising or promotion” even if described as “seminars” and “continuing education courses.” The Seventh Circuit has said that face to face communication isn’t “commercial advertising or promotion” [though query whether that makes any sense if there’s a repeated script]. It sufficed at the pleading stage for Ortho-Tain to allege that the Vivos “course” was presented via online broadcast and live to in-person attendees on at least 26 occasions; another event was a multi-date online recorded presentation that thousands of medical professionals registered for; and the parent webinar was made available online.

And Ortho-Tain plausibly alleged falsity, or at least misleadingness. “If not explicit, the clear inference to be drawn by attendees was that the case studies showed results achieved by Vivos’ products.” In addition, and more controversially, Vivos statements about creating “revolutionary technology” and the “first-ever hope for a lasting solution to the problem of sleep apnea” were not “mere puffery.” “In the context of a scientific field made of up highly educated individuals, it is reasonable to infer at the pleading stage that ‘revolutionary’ and ‘first-ever’ carry specific meanings as to the novel nature or method of the appliance being described.”

Tiktok's other, smaller legal problem

Beijing Meishe Network Technology Co. v. Tiktok Inc., 2024 WL 1772833, No. 23-cv-06012-SI (N.D. Cal. Apr. 23, 2024)

Skipping the copyright and trade secrets part of the case. (In brief: Meishe argued that Tiktok copied its code via an employee who departed. The court found aspects of the copyright/§1202 claims claim insufficiently specifically pled and granted leave to amend, including to add sufficient detail to establish that the works at issue were not US works and thus exempt from the pre-suit registration requirement. The trade secret claims were likewise dismissed with leave to amend, including to specify what acts in furtherance of the offense were committed in the US.)

False designation of origin: Meishe alleged that “TikTok informs users that it owns and has proper rights to the code it uses in its applications”; defendants “have represented that they value intellectual property and would not infringe others’ intellectual property, but have done so as described in this Complaint” and defendants “willfully continued to represent the software as their own, not credited Meishe with being the owners or author of portions of Defendants’ products or code, and not stopped distributing infringing and misappropriated code.” This was classic Dastar. As stated in Luxul Technology Inc. v. Nectarlux, LLC, 78 F. Supp. 3d 1156 (N.D. Cal. 2015) “in this circuit, a reverse passing off claim requires the alteration of a product and a subsequent sale.”

False advertising: Meishe pointed to statements defendants made in their copyright notice at tiktok.com, in the ByteDance Code of Conduct, in TikTok’s Intellectual Property Policy, and in TikTok’s terms of service. But it wasn’t clear that any of these statements were made on the context of “commercial advertising or promotion” or how these statements were likely to influence purchasing decisions by consumers. The court granted leave to amend, but it’s hard to imagine how this gets plausible under the Lanham Act.

 

 

too much complaining about copying triggers Dastar/preemption for other claims

Design Gaps, Inc. v. Hall, 2023 WL 8103156, No. 3:23-cv-186-MOC (W.D.N.C. Nov. 21, 2023)

Design Gaps produces custom cabinetry for high-end homes; Hall is a former employee of Design Gaps who signed a nonsolicitation/noncompete clause but went to work for a design studio that was part of Design Gaps’ main competition, Peters. Peters allegedly subsequently constructed homes with interior designs “substantially similar” to building components depicted in Design Gaps’ technical drawings. Design Gaps had in the past conducted projects for Peters Custom Homes including the design and construction of residential cabinetry in homes referred to as “Quail Hollow North” and “Lake Wylie.” Defendants allegedly promoted the kitchen and other areas of the residences designed and constructed by Design Gaps as their own designs and trade dress.

Design Gaps brought trade secret, tortious interference, and state and federal false advertising/false designation of origin claims against defendants.

Defendants moved to dismiss the Lanham Act claims as preempted by copyright. (It’s preclusion, really, but the court says that preemption principles are implemented by Dastar.) And the complaint was full of references to Design Gaps’ copyrighted designs and defendants’ “copying.” Here there was no extra element rendering the claims qualitatively different from copyright claims. Instead, plaintiffs alleged that the alleged substantial similarity itself constituted a misrepresentation of origin. This was just Dastar: “Design Gaps does not allege that the kitchens and cabinets cited in the Amended Complaint were actually sold in commerce by anyone other than the Peters Defendants.” So too for the state law claims.

who has standing to challenge robot lawyers?

MillerKing, LLC v. DoNotPay, Inc., --- F.Supp.3d ----, No. 3:23-CV-863-NJR, 2023 WL 8108547 (S.D. Ill. Nov. 17, 2023)

“This case pits real lawyers against a robot lawyer.” Spoiler: the robot wins for lack of Article III standing.

DoNotPay is an online subscription service that touts its ability to allow consumers to “[f]ight corporations, beat bureaucracy and sue anyone at the press of a button” and bills itself as “The World’s First Robot Lawyer,” offering legal services “related to marriage annulment, speeding ticket appeals, canceling timeshares, breaking leases, breach of contract disputes, defamation demand letters, copyright protection, child support payments, restraining orders, revocable living trusts, and standardized legal documents.”  But DNP isn’t actually licensed to practice law. MillerKing, a small Chicago law firm that claims to be a direct competitor of DNP, sued DNP for false association and false advertising under the Lanham Act and Illinois state law. Along with state consumer protection claims, MK alleged that DNP was engaged in the unlawful practice of law under Illinois law. (The false association claim was based on the theory that consumers are misled to believe that DNP is affiliated with licensed attorneys and that State bar authorities approve of or sponsor DNP’s services.)

MK “advertises its services online and provides legal services across various practice areas including personal injury, wrongful death, family law, divorce law, child custody, criminal law, traffic law, estate planning, probate, workers’ compensation, business law, municipal law, and mediation.” It sought to represent a class of similar law firms.

DNP advertises that it uses artificial intelligence” rather than “human knowledge.” Users can generate personalized contracts, independent contractor agreements, non-disclosure agreements, bills of sale, prenuptial agreements, LLC operating agreements, promissory notes, and parenting plans. It also touts its ability to give advice on property tax appeal procedures, create customized property tax guides, provide advice on how to appeal traffic tickets in any city, provide services to initiate litigation and obtain a judgment, and guide users through the process of filing a court case. For a lawsuit over $500, DNP states that it “can generate demand letters, court filings and give you a script to read in court.” It claims to have taken on hundreds of thousands of parking ticket cases and overturned $4 million in parking ticket fines; initiated more than 1,000 small claims lawsuits against a single company in 42 states; and “processed over 2 million cases.” However, it backed off a claim that the “robot lawyer” would soon represent someone in a courtroom by whispering in the person’s ear exactly what to say because of “threats from State Bar prosecutors.” Some online reviews are poor, stating that DNP has failed to dispute parking tickets as requested, has created inadequate legal documents, or has included inaccurate information in its forms. DNP removed some products from its website, but it continued to advertise and promote legal products and services including defamation demand letters, divorce certificates, divorce settlement agreements, and numerous other categories of legal services.

MK argued that it, and the class, have been or are likely to be injured by the direct diversion of clients from themselves to DNP or by a lessening of the goodwill associated with MK and the class’s goods and services. That wasn’t enough. MK didn’t allege any lost revenue or added expenditures as a result of DNP’s conduct. Nor did it allege that any MK client or prospective client withheld business, considered withholding business, or even heard of DNP. For the hundreds of thousands of parking ticket cases that DNP claims to have taken on, for example, there was no allegation that those customers originally were clients of MK, had considered hiring MK, or would have sought the advice of any law firm in the first place if not for the representations made by DNP.

As to goodwill, although the complaint alleged that DNP provided some poor customer service, it didn’t allege that DNP’s failures were imputed to MK specifically or lawyers generally. What about Lexmark?

Unlike MK, Static Control not only alleged injury due to diversion of sales and reputational harm, but it also provided the facts necessary to make those allegations plausible. Static Control alleged Lexmark directly targeted its customers and falsely stated that doing business with Static Control was illegal. These facts are sufficient to state a concrete, particularized, and actual injury. MK’s general allegations that DNP has caused a diversion of clients and loss of goodwill, on the other hand, are not.

Even if the Court were to find that MK (a law firm) was a “direct competitor” of DNP (an AI-based legal subscription service), the court would not presume Article III standing from direct competition. “MK has conflated the injury requirement for a statutory cause of action under the Lanham Act claim with Article III’s injury-in-fact requirement.” Maybe presuming injury  works in other cases, but the products here were different enough that the court declined to do so. “[T]he Court will not infer that MK has suffered harm through lost clients just because DNP has gained them.”

putting a label on a product you produce isn't direct false advertising, but could be direct false association

OK, I admit I'm pretty baffled by this.

Hawaii Foodservice Alliance, LLC v. Meadow Gold Dairies Hawaii, LLC, 2023 WL 159907, No. 21-00460 LEK-WRP (D. Hawai’i Jan. 11, 2023)

Plaintiff alleged that defendant MGD advertises and sells milk that is one hundred percent from cows outside of Hawai‘i. Defendant dairy farmers allegedly apply labels to the pre-packaged milk products “indicating such products originate from ‘Hawaii’s Dairy,’ are ‘Made with Aloha,’ and, in some instances, are associated with the farmers in Oahu who produced milk from their cows in Hawaii through the ‘Dairymen’s Association’ beginning in the late 1800s, before they are shipped to MGD in Hawaii.” Some mainland milk was allegedly pasteurized in California, shipped to and re-pasteurized on the Island of Hawaii, and then packaged by MGD with identical labeling. “Hawaii’s Dairy” and “Made with Aloha” on the labels allegedly falsely represented origin, as did MGD’s website claims of “AN ISLAND TRADITION,” “that MGD is proud to be locally owned and operated” and MGD “continue[s] to produce your Meadow Gold favorites always made with aloha.” “MGD’s website also prominently features the MGD mascot known as ‘Lani Moo’ in local Hawaii attire, along with several photographs of farmland and a cow in Hawaii[.]” Plaintiff alleged, however, that “MGD owns zero cows in Hawaii ... and owns zero dairy farms in Hawaii.” Allegedly, a different “Meadow Gold” entity long ago operated dairy farms in Hawaii, but MGD didn’t.

Plaintiffs’ claims sought to hold the dairy farmers directly or contributorily liable under the Lanham Act, and alleged unfair competition/false advertising/deceptive trade practices under Hawaii law. The dairy farmers sought dismissal.

Was a false geographic origin claim one for false association, § 1125(a)(1)(A), or false advertising, § 1125(a)(1)(B)? Courts have treated them as one, the other, or both; the court here said that they could be both.

Why does this matter? Perhaps because courts are tougher on false advertising claims in a lot of ways, including with precedent that, for false advertising, direct liability only attaches to actors who actively make false or misleading claims, while false association allows direct liability for those who only “use” such claims (note this doesn’t actually matter to the outcome of this case, but it matters to retailers). Here, under §43(a)(1)(A), “Plaintiff need only allege that the Dairy Farmers used in commerce any word (or words) which is likely to cause confusion as to the geographic origin of their milk products by another person.” That was sufficiently alleged. The defendants allegedly put the products in interstate commerce and applied the labels to them. The court didn’t bother to analyze contributory liability.

What about direct liability for false advertising? Defendants argued that there was no literal falsity, but misleadingness and materiality was also alleged. Here, the dairy farmers allegedly individually produced, packaged, and labeled the milk products on the mainland then sent them to Hawai’i for MGD to sell on the island.  “[H]owever, Plaintiff does not allege that the Dairy Farmers had control over, or involvement in, creating the statements on the labels. Thus, the Court cannot determine whether the Dairy Farmers are the entities that made ‘the specific, false statements at issue in the litigation[,]’ even if they ultimately applied the labels to the products.” [This strikes me as a really constrained reading of direct liability, and very much in contrast to the leniency IP claimants get. Compare an allegedly false statement presented in an ad as a quote from an endorser: would the advertiser not be directly liable because it wasn’t the first to make the statement?] Thus, the direct liability claim for false advertising was dismissed with leave to amend.

Contributory false advertising: This requires that the defendant contributed to direct false advertising either by knowingly inducing or causing the conduct, or by materially participating in it. Participation can occur when “the defendant directly controlled or monitored the third party’s false advertising,” or possibly when the defendant provided “a necessary product or service, without which the false advertising would not be possible.” On a motion to dismiss, courts look for a plausible inference of knowing or intentional participation, examining “the nature and extent of the communication” between the third party and the defendant regarding the false advertising; “whether or not the [defendant] explicitly or implicitly encouraged” the false advertising; whether the false advertising “is serious and widespread,” making it more likely that the defendant “kn[ew] about and condone[d] the acts”; and whether the defendant engaged in “bad faith refusal to exercise a clear contractual power to halt” the false advertising.

Here, plaintiff sufficiently alleged direct false advertising against MGD.  And it alleged that the milk producers knew that their respective milk products were not sourced from Hawai‘i and that the labels they applied to those products were false, misleading, and/or deceptive, but supplied the milk products to MGD nonetheless.

But plaintiff didn’t adequately allege that the Dairy Farmers “intended to participate or actually knew about the false advertising.” Labeling products with packaging that said “Hawaii’s Dairy” and “Made with Aloha,” does not on its own “suggest[ ] a plausible inference of knowing or intentional participation.” [Um, if they were doing it on the mainland, why not? Surely they knew they were doing it on the mainland, and not in Hawai’i?] Plaintiff failed to allege “the nature and extent of the communications between” the dairy farmers and MGD regarding the statements and thus they didn’t allege material participation. [I also have no idea how a plaintiff is supposed to allege internal communications.]

In addition, plaintiff failed to plead the requisite knowledge with particularity. [I’m not a civ pro expert, but I thought that, even with fraud, knowledge and intent can be alleged generally as matters entirely within the knowledge of the defendant.]

“Ultimately, Plaintiff does not sufficiently allege the Dairy Farmers induced, caused, or worked to bring about the alleged misleading statements.” But there was leave to amend.

Unfair competition under Hawai’i law: This requires unfair conduct that “offends established public policy and … is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers,” plus injury that negatively affects competition or harms fair competition. This too failed as to the dairy farmers, who allegedly did nothing more than labeling and packaging their milk product. So too with state law false advertising.

Deceptive trade practices: This applied to a person who, inter alia, caused likely confusion about source etc. or used deceptive representations or designations of geographic origin. This was plausibly alleged. The dairy farmers “used those labels and statements insofar as they packaged, labeled, and shipped the milk products to Hawai’i.”

selling allegedly stolen/converted merchandise isn't reverse passing off

ML Fashion, LLC v. Nobelle GW, LLC, No. 3:21-CV-00499 (JCH), 2022 WL 313965 (D. Conn. Feb. 2, 2022)

The parties have a dispute over control of a fashion business. The Lanham Act claim is based on alleged diversion/conversion of products from one store to another, allegedly “depicting the real property, stolen products, and fixtures, furniture, and equipment in the store as its own.” The rival store, Nobelle, allegedly sells identical items procured from the same vendors as ML Fashion’s, which are supposed to be exclusive, and uses the same online descriptions “down to the prices and the photographs and text descriptions of the products.” “Since in or about late 2020, ML Fashion has been receiving calls from vendors about unpaid bills or about where to ship certain goods that have turned out to be for Nobelle.” This allegedly showed confusion about whether plaintiffs backed defendants. (I’m skipping details relevant to other claims.)

False advertising: Plaintiffs didn’t allege that Nobelle altered the merchandise in any way; “instead, the false statement arises from implication, from the fact that Nobelle is selling products that are not theirs to sell and, in the case of ‘The Line’ items, products it does not have the authority to sell.” But the complaint didn’t actually allege that defendants advertised items from “The Line,” only that they sold them. Second, more fundamentally, this was conversion/breach of contract, not false advertising. Advertising and selling merchandise that allegedly beloned to ML Fashion was not itself a false statement. The merchandise was neither branded “Nobelle” or with any mark owned by plaintiffs. The Lanham Act “imposes no affirmative duty of disclosure” on advertisers, and that “a claim [generally] cannot be based on the failure to disclose a fact” unless affirmative statements required clarification, and no such affirmative statements were alleged.

Unfair competition: Under the circumstances, this had to be false designation of origin/reverse passing off.  But ML didn’t plausibly alleged that defendants falsely designated an origin. “[T]he plaintiff[s] must allege an affirmative act in which the defendant falsely represented itself as the product’s owner or creator.” While “repackag[ing]” or altering the product in some way might be sufficient, “cases involving a claim for reverse palming off generally” – but not always – “entail the defendant removing the plaintiff’s trademark and replacing it with the defendant’s own mark.” In addition, Dastarwarns that “[t]he words of the Lanham Act should not be stretched to cover matters that are typically of no consequence to purchasers.” One case previously held that “consumers are unlikely to care who owns the product”, provided they are not being deceived in any way about its quality or maker. “It follows logically that a reverse passing off claim based entirely on disputed ownership of the goods being sold – but devoid of any affirmative false representation or allegation that the product being sold was altered in any way – is insufficient to state a claim.” There were no allegations that defendants did anything to deceive consumers into thinking that “The Line” or other branded products they are selling were in reality made by Nobelle.